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District Will Survive Summer Budget Stalemate; Fall's the Problem

July 11, 2003

The current Sacramento stalemate over a 2003-04 state budget will not affect the Long Beach Unified School District’s ability to pay employees or vendors this summer. But if the impasse continues into September without a state budget, local school districts could encounter a severe cash-flow problem.
Last year, the state budget also missed its July 1 deadline and was not approved until the first week of September. That was before the state had seen its earlier $11 billion surplus deteriorate to an unprecedented $38 billion deficit.
“We expect no problem paying our July and August bills,” said Larry Bozanich, financial services officer. “But in September, with thousands of teachers and other 10-month employees returning to work, the district must be able to meet its much larger payroll obligations.”
If the state still has not approved a budget by the end of September, “We could hit the wall and may need to borrow available cash from other funds to keep the General Fund solvent,” he said. “It’s never gotten this ugly before.”
The gridlock in the California Legislature over proposals to raise taxes and cut services is not expected to be resolved soon. Both sides in the partisan debate are still far apart.
In the worst-case scenario, the L.A. County Office of Education, which issues payroll checks to all school employees who work in L.A. County, may have trouble guaranteeing that the checks won’t bounce because of insufficient funds.
“We hope that doesn’t happen,” said Bozanich. “We hope the state will approve a budget in time to avoid any hardship on school employees and their families. We’ll just have to wait and see.”
The state’s $38 billion deficit continues to worsen. School districts could exhaust cash reserves this fall unless the state borrows money to balance the budget, cuts spending, increases taxes or approves some combination of all three. Although the growing state deficit may require years to recover from, the Long Beach Unified School District is in better financial condition than many other school districts.
“We’re all going down the same road,” said Bozanich, “but others may go over the cliff first.”
Unlike several California school districts that are already bankrupt or on the verge of bankruptcy, LBUSD has made prudent budget cuts over the past two years and has reduced staff through normal attrition and by not filling some vacancies. This district was one of the few large districts in California that did not issue layoff notices as a result of recent state budget cuts to education.

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